A Multivariate Analysis of Retail Prescription Prices

Abstract

Discrimination against blacks may be part of our American marketing system. Little is known about racial discrimination at the retail level because of many confounding factors which affect blacks' expenditure patterns. This study successfully isolated the race factor as a possible cause of price discrimination in a prescription drug purchase. Much confusion exists as to whether the poor pay more, and who is more likely to be poor. For example, only 8% of white families headed by a person under 65 are classified as poor by the Social Security Administration, but approximately 30% of black families headed by a person under 65 are classified as poor [4]. Black families are about four times more likely to be poor than white families. Perhaps the question of the poor paying more should be restated, Do the black poor pay more? A Philadelphia study concluded that the poor do not pay more because they travel outside of their immediate community to purchase food items [2]. The results are misleading because the study measured shopping opinions of respondents whose family incomes averaged between $4,000 and $5,000 per year, which is greater than present poverty levels. Other sources have reported conflicting results. The Wall Street Journal reported that the poor pay more for food and presciption drugs regardless of the type of store patronized [7]. There is confusion about the difference between racial and economic class discrimination because many studies are institutionally, rather than consumer, oriented. For example, in a study of 240 Philadelphia food stores it was found that inner city independent food stores charged less for a food basket than small independent retailers located in higher-income areas [1]. No pattern of price differences was discovered between inner city and suburban supermarkets. However, there were only three supermarkets in the inner city and 84 in the suburbs. The small independent food store universally charged more for a food basket than the supermarket. The study made inferences about institutional price discrimination rather than about discrimination by race and economic class.